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SMEs and Public Equity Financing: A New Dataset of SME Boards in Emerging-Market and Developing Economies

Aug 02, 2017

By John Schellhase and Jim Woodsome 


In recent years, a number of stock exchanges in emerging-market and developing economies have established dedicated market segments for small and medium-sized enterprises (SMEs). The main purpose of these SME boards, as they are often called, is to expand access to equity finance for relatively small but growing firms with the potential, as a group, to significantly contribute to economic growth and employment. In some cases, SME boards also serve as feeder exchanges, incubating firms for later graduation to a stock exchange’s main board. Today, there around 30 dedicated SME boards in emerging-market and developing economies, the majority of which have been established in the last decade or so.

Due to the role these firms can play in creating jobs and diversifying economies, improving access to finance for SMEs is a long-standing policy goal in developed and developing countries alike. As banks have curbed their lending to SMEs in the wake of the global financial crisis, policymakers and industry bodies are now increasingly emphasizing non-bank financing alternatives for SMEs. Public equity financing is one option that may be suitable for fast-growing SMEs with the capacity to meet the listing requirements. SME boards may contribute to expanding financial access for SMEs both directly, by facilitating access to public equity financing, and indirectly, by incentivizing listing firms to improve their financial reporting and corporate governance practices, which may, in turn, make them more appealing to credit-based lenders. 

This paper is a brief stocktaking of SME boards in emerging-market and developing countries. The analysis is based on a unique dataset created jointly by the Milken Institute Center for Financial Markets and the World Federation of Exchanges. The dataset covers 26 SME boards over the period 2002-2015.

As far as we know, this will be the first time this kind of time-series, composite dataset on multiple indicators for SME boards has been published. In this paper, we examine whether these SME boards have managed to maintain or grow their listings over time, how much capital listed firms have raised, and how common it is for firms to delist. Additionally, we offer an initial assessment of how well these boards have performed as incubators for graduating firms to senior markets. We expect that the data presented in the appendix at the end of this paper will be of interest and of use to policymakers and researchers who want to further investigate and evaluate the role of SME boards in expanding access to capital.